How Does Bitcoin Mining Work?
With the hype surrounding Bitcoin, one often hears that the origin to Bitcoins lies in the mining of the cryptocurrency. All across the globe, hundreds and thousands of specialized systems have been employed in the task of mining Bitcoins. In light of the same, the question arises as to how does Bitcoin mining work.
What is Bitcoin Mining?
Before understanding how Bitcoin mining works, a preliminary question that should be answered is what is Bitcoin mining? Mining is essentially earning the cryptocurrency Bitcoin without buying it or having to trade in it (However, if you are more interested in trading, we suggest you go here). Mining of Bitcoin adds to the number of Bitcoins being circulated for trading.
Why is Mining necessary?
The manner in which Bitcoins work is that they do not rely on centralized intermediaries such as Banks, instead the records of Bitcoin transactions are recorded on a Blockchain.
In the absence of a centralized authority which verifies transactions, the question arises as to which transaction is valid and how to ensure that the same Bitcoin is not being spent twice. It is in this scenario that Bitcoin mining is of paramount importance.
How does Bitcoin Mining work?
Every few minutes, mining computers collect pending Bitcoin transactions and convert them into a mathematical puzzle. The first miner who solves that puzzle, and the same is approved then that miner gets that set of Bitcoins.
This puzzle is essentially a 64 digit hexadecimal number (which is referred to as a ‘hash’) that is less than or equal to the target hash.
In order to do this, miners require computers of extremely high computational power. The computational power is so high, that miners have 13, 000 times the computational power of the world’s 500 biggest supercomputers.
Given this requirement, miners often form pools through which they pool their computational power for mining operations.
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